All eyes on California

Happy Friday!?

Usher can lay claim to a banner 2024: A new album, a pretty entertaining Super Bowl halftime show, and — perhaps most importantly — a multi-unit franchise deal with Dave’s Hot Chicken. Usher is investing in a 9-unit Atlanta franchise group, the company said.

“Dave’s Hot Chicken is some of the best hot chicken I’ve ever had,” Usher said in a statement. “I’m excited to be involved with the brand and bring Dave’s delicious tenders and sliders to people across Atlanta.”

Usher joins early investor Drake in making Dave’s maybe the only restaurant chain that could sell out an arena for its franchise convention.

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3 Numbers

$12.83 million

Average unit volumes at the Cheesecake Factory, according to a new Circana report on the top 50 highest-grossing U.S. restaurants. That ridiculous number earned Cheesecake a spot on the top 50 list despite the chain owning just 206 locations.

3 in 4

Number of Americans who believe tipping has gotten “out of control,” according to a recent WalletHub survey. Some other insights: 78% of people think automatic service charges should be banned, and 50% “often” leave a tip due to social pressure “rather than good service.”

$2 billion

Annual digital sales for Wingstop, which began rolling out its new proprietary tech platform this week. The company says it’s spent three years and $50 million in building its in-house program, which is aimed at increasing store average unit volumes and helping the company reach its goal of digitizing 100% of transactions.

What’s In the News

California’s QSR-focused minimum wage increase (AB 1228) went into effect this week, and just about everyone in the industry is watching to see its impact.

To start: Many workers immediately received a 25% raise, with the wage hikes mostly affecting those employed in areas with lower costs of living.

The law is directly targeted at fast-food chains with more than 60 nationwide locations, but the wage increase (from $16 to $20) is expected to have a “spillover effect” to other restaurants and retail outlets. Via CNBC:

The law won’t directly touch other restaurants in California — small coffee chains, mom-and-pop diners and upscale steakhouses — but they still could have to adjust their pay as they compete for the same employees. And industries that rely on hourly workers, such as retail and hospitality, may also face pressure to match their wages or risk losing their employees.

“I think we are going to see spillover effects within food service, but beyond that, we should expect to see spillover effects to other industries that are competing for this talent,” Daniel Zhao, lead economist for career site Glassdoor, told CNBC.

Jack in the Box, Starbucks, McDonald’s and Chipotle are all on the record as saying they will raise prices. (Chipotle’s increase was likely around 7.5%, per analysis by Mark Kalinowski.) Pizza Hut franchisees PacPizza and Southern California Pizza Co. have already eliminated more than 1,000 delivery driver jobs and have stopped their first-party delivery services. Many restaurant owners expect to cut hours (which was a major side-effect 10 years ago after Seattle raised its minimum wage to $15 an hour).

Dave’s Hot Chicken, which started in LA and has around 40 locations in the Golden State, gave one of the most in-depth breakdowns on how chains are adapting. Via Restaurant Dive:

To start, the chicken chain is raising prices 9% at its company-operated stores and has recommended California operators do the same, said Jim Bitticks, Dave’s chief operating officer and a franchisee with two California stores. About 90% of the brand’s Golden State restaurants have committed to that level of pricing.?

“Our goal was to maintain the bottom line dollars, not the bottom line margin,” Bitticks said.?

Maintaining the same percentage margin, as many other fast food chains are attempting, rather than the same dollar amount of profit would have required a much heftier price increase, he said.

Dave’s said that it instituted its price hikes in two waves, after market testing the price increases in nine locations last fall. The chain did not see traffic declines during the test, but it did say the data was “noisy” due to holiday traffic patterns.

Dave’s is also testing in-store kiosk ordering, which tracks with a pretty widespread belief that the minimum wage increase will lead to restaurants adopting more automation.

But COO Bitticks said that while kiosks have led to bigger checks, they did not save money on labor, since workers still need to be present to assist customers with placing their kiosk orders.

Interestingly, this also aligns with a fascinating thread on X started by McDonald’s franchisee @McFranchisee, who said that kiosks have helped McDonald’s become more efficient, but typically result in a reallocation of labor.

Of course, there are other technologies that could be deployed to help restaurants save on labor costs — Chipotle’s automated makeline, Miso Robotics’ Flippy — and it’ll remain to be seen if AB 1228 speeds up their adaptation.

Headlines

Punch Bowl Social?acquired two new growth concepts — a karaoke brand and “immersive art experience.” KFC released “saucy nuggets.”?Swig CEO Rian McCartan departed the company. IHOP launched the dirty soda-influenced Pepsi Maple Syrup Cola. McDonald’s added a second CosMc’s location — this one in Dallas. Delight Restaurant Group?acquired 65 Wendy’s franchises. Chick-fil-A’s delivery-focused concept Little Blue Menu is now selling pizza topped with nuggets. ASAP delivery service (formerly known as Waitr) has ceased operations. Papa Johns?recruited Big Boi to soundtrack its latest marketing campaign. Heinz (boldly!) placed ketchup dispensing stations outside Chicago hot dog restaurants. Bob Evans?is reportedly on the market. 7-Eleven?releases “Big Bite Hot Dog Flavored Sparkling Water” (America: we’re innovating again!)

Name That Chain!

You’ve got three guesses to name this week’s mystery chain:

• The founders found this chain’s name in a phone book. (Other food-related names that were considered: “Cinnamon’s” and “Pepper’s.”)
• Its largest location is 3 stories tall (and is situated just north of Times Square).
• Known for its creative cocktails, in just one year the chain released the “Bahama Mama,” Jolly Rancher, and “Zombie” flavors.

What is this mystery chain?

Last week’s answer: Hula Burger

#Content Recs

• How Yum is attempting to go “AI first.” (One big takeaway: the company is testing a generative AI tool that will let team members ask operational questions and get answers without consulting a training manual.)
• The hunt for the “right amount of loud” in a restaurant.
• Two Restaurant Business pieces worth reading: 71% of Gen Zers give a thumbs-up to restaurants using dynamic pricing, and other fascinating insights from a recent NRA tech survey. And how shared-kitchen startup Nimbus is finding profitability by providing shared kitchen spaces for food producers outside of just restaurants.
• Interesting thread on a former consultant who bought an ice-cream shop.
• A pretty comprehensive list of the most iconic food scenes in The Sopranos.
• The case for making Janet Yellen the next host of Diners, Drive-Ins, and Dives.

‘Member When?!

2000 was a big year for time capsules. It’s my deepest wish that at least one of them included a DVD of this commercial, which — in the span of a mere 30 seconds — perfectly evokes the feeling of watching TV in the year 2000.

McDonald’s introduced the McSalad Shakers to great fanfare in 2000. Coming in three different varieties — the Grilled Chicken Caesar, the Chef McSalad, and a Garden McSalad — they were ingeniously packaged in plastic cups that fit in a car’s cupholder. Customers were invited to pour one of five salad dressings into the cup, and then to vigorously shake said cup (presumably while listening to a sick early 2000s techno beat).

Alas, the McSalad Shakers lasted only three years. They were replaced by the Premium Salads line, which also went extinct in 2020 as McDonald’s began limiting its menu during the pandemic. But every now and then, they’ll pop back up on X, prompting a wistful smile from anyone over the age of 30.

Thanks for reading! We’ll be back next Friday with a recap of industry news.

Andy